Last week, the Ways and Means Health Subcommittee met to review the current Medicare benefit design and examine ways to improve it. Subcommittee Chairman Kevin Brady (R-TX) said he held the hearing to start bipartisan efforts at gathering ideas about revamping Medicare. Central to the conversation were questions related to balance between shifting costs onto beneficiaries to keep program financing sustainable and attempting to protect beneficiaries from excessive out-of-pocket costs. Witnesses' suggestions included increases in cost-sharing coupled with a cap on out-of-pocket costs, combining the separate deductibles for Medicare Parts A, B and D, and moving away from the current a "one-size-fits-all" copay model, in which beneficiaries are charged the same amount for every doctor visit, diagnostic test and prescription drug.

On Wednesday, the House Energy and Commerce Health Subcommittee held a hearing entitled "Fostering Innovation to Fight Waste, Fraud, and Abuse in Health Care," in which experts from CMS, GAO and the insurance industry, among others, offered insights as to the current extent of fraudulent activities in the health care sector, and how best to combat them. Chairman Pitts (R-NJ) noted that the medical loss ratio (MLR) provision in the ACA could hinder antifraud activities in the private market, and Members on both sides of the aisle expressed concerns about the impact sequestration could have on existing activities designed to combat fraud in government programs like Medicare and Medicaid, both of which have been designated as having a high risk for fraud by GAO.

Witness List:

Panel I

Peter Budetti Deputy Administrator and Director, Center for Program Integrity Centers for Medicare and Medicaid Services

Last week, House Ways and Means Oversight Subcommittee Chairman Boustany (R-LA) announced his panel would hold a March 5 hearing to explore tax provisions in the 2010 health care reform law. According to thehearing notice, the panel will review the status of implementation of the ACA's tax provisions, compliance issues associated with those tax provisions and accompanying rules, and the economic effects of the provisions. The law "imposes a number of new taxes and reporting requirements on individuals and various industries -- and many of those tax hikes hit the middle class," Boustany said. "We are starting to see that these provisions make it harder for businesses to create good paying jobs and may adversely affect the quality and accessibility of health care." The hearing is scheduled to take place immediately after a subcommittee organizational meeting.

Last week, Republican Sens. Hatch (R-UT) and Alexander (R-TN) reintroduced legislation to repeal the ACA's requirement for employers to provide health insurance for their employees, or pay a fine. Similar legislation has been introduced in the House by Reps. Boustany (R-LA), Tiberi (R-OH), Barrow (D-GA).

Last week, Republican lawmakers from both chambers of Congresswrote a letter to CMS Acting Administrator Tavenner highlighting five major areas of concern over the Medicare Advantage (MA) program as it relates to spending reductions called for under the ACA and other activities within the Administration. Authored by Senate Finance Committee Ranking Member Hatch (R-UT), House Energy and Commerce Committee Chairman Upton (R-MI) and Ways and Means Chairman Camp (R-MI), the letter specifically cites the ACA's failure to fix the flawed sustainable growth rate (SGR) formula, and a lack of transparency in the development of methodology and data sets used to determine the per beneficiary Medicare cost growth rates and county-level benchmarks for MA plans as having an adverse impact on the GOP-supported MA program. "While the Obama Administration has expressed its support for the MA program growth in the past and taken credit for increased enrollment during the demonstration period, we are concerned that cuts contained in the President's health law and administrative policies are undermining that stated goal," they wrote.

On Wednesday, the Senate Finance Committee held a hearing on "The Power of Transparency: Giving Consumers the Information They Need to Make Smart Choices in the Health Insurance Marketplace." At issue was an ACA requirement for insurers to spell out their coverage in plain, language on a form known as the Summary of Benefits and Coverage (SBC), which includes examples of potential costs for a range of common conditions, a question-and-answer section and a glossary of technical insurance terms. While the form itself has received support from both parties, Republicans pivoted at times from the SBC to some other mandates within the ACA they claim will raise the cost of the health care. "There are a lot of mandates in the bill and this is one I think is very popular and I think will in the end get more information out there," ranking member Thune (R-SD) said. "But I think there are other mandates that will put upward pressure on the cost of health care plans in this country."

Witnesses:

Ms. Margaret O'Kane President National Committee for Quality Assurance

On Wednesday, the Senate Special Committee on Aging held a hearing, the first under new-Chairman Nelson (D-FL), on "Strengthening Medicare for Today and the Future," to explore ways to shore up the federal health insurance program that covers 48 million seniors and disabled Americans. Though there is bipartisan agreement that the program's current spending trajectory, coupled with an influx of baby boomers, is not sustainable in the long term, there is disagreement over how to shore up its finances. The committee heard from a panel of health care delivery experts on a number of ideas aimed at keeping Medicare costs under control by improving care. Among other things, they discussed paying providers for quality of care instead of quantity of care and reducing costly and unnecessary hospital readmissions.

Last week, HHS published afinal rule providing detail and parameters related to the risk adjustment, reinsurance and risk corridors programs; cost-sharing reductions; user fees for Federally-facilitated Exchanges; advance payments of the premium tax credit; the Federally-facilitated Small Business Health Option Program; and the medical loss ratio program. Cost-sharing reductions and advance payments of the premium tax credit, combined with new insurance market reforms, are intended to increase the number of individuals with health insurance coverage, particularly in the individual market. In addition, the premium stabilization programs -- risk adjustment, reinsurance and risk corridors -- are aimed at mitigating the effects of adverse selection. These programs, in combination with the medical loss ratio program and market reforms extending guaranteed availability (also known as guaranteed issue) and prohibiting the use of factors such as health status, medical history, gender and industry of employment to set premium rates, compose a significant portion of the ACA's provisions intended to ensure access to high-quality, affordable health insurance.

OPM has issued afinal rule establishing the Multi-State Plan Program (MSPP) pursuant to the ACA. Under the program, health insurance issuers, through contracts with OPM, will offer at least two multi-state plans (MSPs) in each of the Affordable Insurance Exchanges (Exchanges). One of the issuers must be nonprofit. Under the law, an MSPP issuer may phase in the states in which it offers coverage over four years, but it must offer MSPs on Exchanges in all states and the District of Columbia by the fourth year in which the MSPP issuer participates in the MSPP. This rule aims to balance adhering to the statutory goals of MSPP while aligning its standards to those applying to qualified health plans to promote a level playing field across health plans.

Last week, New Jersey Gov. Chris Christie added his name to the growing list of GOP governors expressing support for an expansion of the Medicaid program, pursuant to the ACA. Christie is the eighth Republican governor to support the expansion, which many other Republicans have opposed, typically on the basis of cost, though the federal government has pledged to pick up the majority of the cost of the expansion. Expansion would extend coverage to an estimated 300,000 uninsured New Jersey residents.

According to Democrat Arkansas Gov. Beebe, HHS Secretary Sebelius and Medicaid chief Cindy Mann, Gov. Beebe's state has been given the green light to implement an expansion of his state's Medicaid program by allowing newly eligible individuals the opportunity to purchase private insurance plans using federal dollars. Under the plan, the state would take the federal dollars earmarked for Medicaid expansion and use them to provide private coverage through an insurance exchange to hundreds of thousands of residents who earn less than 138 percent of the federal poverty level. According to the Arkansas Times, "This isn't 'partial expansion.' The full pool of folks that would gain coverage under full expansion of Medicaid would still get it. But Arkansas is the first state to publicly get a deal that accomplishes this not via the Medicaid program but via the exchange." Arkansas has been working to develop a federal partnership exchange since December 2011, though Beebe has expressed skepticism at the idea of an expansion of his state's Medicaid program, pursuant to the ACA.

Thisproposed rule would implement provisions of the ACA related to the Small Business Health Options Program (SHOP). Specifically, this proposed rule would amend existing regulations regarding triggering events and special enrollment periods for qualified employees and their dependents and would implement a transitional policy regarding employees' choice of qualified health plans (QHPs) in the SHOP. Notably, in the proposed rule, HHS stated that SHOP exchanges do not have to offer the employee choice model, which would give employees greater freedom to enroll with the insurer and plan of their choice, and premium aggregation until Jan. 1, 2015. State-based exchanges have the option to offer those programs in 2014, but federal-run SHOP exchanges will have a one-year delay. Comments are due by March 31, 2013.

HHS has issued aninterim final rule with comment that builds upon standards set forth in the HHS Notice of Benefit and Payment Parameters for 2014. The interim final rule will adjust risk corridors calculations that would align the calculations with the single risk pool provision, and set standards permitting issuers of qualified health plans the option of using an alternate methodology for calculating the value of cost-sharing reductions provided for the purpose of reconciliation of advance payments of cost-sharing reductions. Comments are due by May 1, which is also when the rule becomes effective.

On Friday, DOL published an interim final rule that would implement the employee protection (whistleblower) provision of Section 1558 of the Affordable Care Act, to provide protections to employees of health insurance issuers or other employers who may have been subject to retaliation for reporting potential violations of the law's consumer protections (e.g., the prohibition on denials of insurance due to pre-existing conditions) or affordability assistance provisions (e.g., access to health insurance premium tax credits). The interim rule also establishes procedures and time frames for the handling of retaliation complaints, including procedures and time frames for employee complaints to the Occupational Safety and Health Administration (OSHA), investigations by OSHA, appeals of OSHA determinations to an administrative law judge (ALJ) for a hearing de novo, hearings by ALJs, review of ALJ decisions by the Administrative Review Board (ARB) (acting on behalf of the Secretary of Labor) and judicial review of the Secretary's final decision. Comments will be received until April 23, 2013.

CMS has announced it will collect licensing and other identifying information to register health insurance brokers and agents for federal health insurance exchanges. According to a notice published Feb. 7, health insurance brokers and agents would submit "basic identifying information on the exchange portal during the initial registration phase." When registration is completed, brokers and agents would be routed to CMS's Learning Management System "to access and complete required training and exams." User names and ZIP Codes for the brokers and agents would then be used to record training history and to communicate the results with the federally facilitated exchange (FFE). Comments are due by April 8.

On Friday, CMSannounced proposed payment and policy guidance for Medicare Advantage (Part C) and Medicare prescription drug (Part D) plans for 2014. In its 2014 Advance Notice and draft Call Letter, CMS noted that in addition to reductions in Medicare Advantage premiums extending through 2013, costs of the defined standard Part D plan will be lower in 2014 than they are in 2013. The standard Part D deductible will be $310, down from $325 in 2013, and cost-sharing amounts will also be lower. Comments on the proposed Advance Notice and draft Call Letter must be submitted by March 1, 2013. The final 2014 Rate Announcement and Call Letter, including the final MA and FFS growth percentage and final benchmarks, will be published on Monday, April 1, 2013. For more information, please visit:

CMS also announced a proposed rule implementing the Affordable Care Act's medical loss ratio requirements for Part C and Part D plans. Specifically, Medicare health and drug plans will be required to meet a minimum medical loss ratio of at least 85 percent of revenue on clinical services, prescription drugs, quality improvements and/or direct benefits to beneficiaries in the form of reduced Medicare premiums beginning in 2014.

Comments on the proposed rule must be received by April 16. To view the proposed Medical Loss Ratio Requirements for MA and Part D go towww.ofr.gov.

CMS has issued aproposed rule that would change existing regulations governing the proficiency testing (PT) process mandated by the Clinical Laboratory Improvement Amendments of 1988 (CLIA). As currently written, regulations dictate that any laboratory that intentionally refers a PT sample to another laboratory for analysis will automatically lose its CLIA certificate for at least one year. The proposed rule would reform Medicare regulations that CMS has identified as unnecessary, obsolete or excessively burdensome on health care providers and suppliers, as well as certain regulations under CLIA. This proposed rule would increase the ability of health care professionals to devote resources to improving patient care, by eliminating or reducing requirements that impede quality patient care or that divert resources away from providing high-quality patient care.

The proposed rule includes a related provision to existing regulations that would implement the recently enacted Taking Essential Steps for Testing Act of 2012 (TEST Act), which gives CMS the express authority to impose alternative sanctions in the event of a PT referral.

The U.S. Food and Drug Administration (FDA) has issuedfinal regulations amending the content and format of prescribing information for human drug and biologic products. According to the agency, the goal of the regulation "is to provide more informative and accessible prescribing information, resulting in a better risk communication and management tool." Among other provisions, the final rule would revise current regulations to require that the prescribing information of new and recently approved products include highlights of the prescribing information (Highlights) and a table of contents (Contents) for the full prescribing information (FPI). Comments must be submitted by March 8.

As part of the National Plan to Address Alzheimer's Disease, the FDA has issueddraft guidance to help drugmakers develop treatments for Alzheimer's disease before dementia sets in. "The purpose of this guidance is to assist sponsors in the clinical development of drugs for the treatment of various stages of Alzheimer's disease (AD) that occur before the onset of overt dementia. Specifically, this guidance addresses the FDA's current thinking regarding the selection of patients with early AD, or patients who are determined to be at risk of developing AD, for enrollment in clinical trials." Comments will be accepted until April 8.

On Jan. 30, CMS and IRS issued proposed rules outlining exemptions from the individual mandate requirement of the Affordable Care Act. The proposed rules will "help to ensure that the [individual mandate penalty] applies only to the limited group of taxpayers who choose to spend a substantial period of time without coverage despite having ready access to affordable coverage," according to a joint CMS-IRS fact sheet. Specifically, the proposed rule would allow exemptions from the penalty for nine categories of individuals, including those who would have been eligible for Medicaid under the expansion allowed by the ACA, but live in a state that opts to not expand.

Other notable provisions include:

Religious Conscience: Under the proposed rule, the religious conscience exemption would apply to members of religious sects that are recognized as conscientiously opposed to accepting insurance benefits. The Social Security Administration currently administers the process for recognizing the groups under the law.

Self-Funded Student Plans: HHS said self-funded student health plans satisfy the ACA's minimum coverage requirements, though the proposed rule could allow the self-funded plans to set caps on certain benefits.

Family Subsidies: The proposed IRS rule states that the agency will consider individual coverage affordable if there is an offer for insurance where the premiums are 9.5 percent of household income or less, and assumes that the spouse or children of the individual would have affordable coverage as well. Family premium subsidies will not be available to the families of workers who can afford individual insurance through their employers.

Comments are due March 18 for the HHS proposed rule and May 2 for the IRS proposed rule. IRS has scheduled a public hearing May 29.

Treasury and IRSreleased a notice of proposed rules (REG-138006-12) Dec. 28 on employer-provided health care coverage related to ACA's employer "shared responsibility" provisions, which were added to the tax code under Section 4980H. Starting in 2014, employers with at least 50 full-time and/or full-time equivalent employees (FTEs) will be required to offer affordable health care coverage that provides a minimum level of coverage or pay a penalty. These proposed regulations would affect only employers that meet the definition of "applicable large employer" as described in these proposed regulations. As discussed in section X of this preamble, employers may rely on these proposed regulations for guidance pending the issuance of final regulations or other applicable guidance. This document also provides notice of a public hearing on these proposed regulations.

The FDA hasissued guidance intended to assist sponsors who wish to develop formulations of opioid drug products with potentially abuse-deterrent properties (abuse-deterrent formulations). Specifically, the guidance explains FDA's current thinking about the studies that should be conducted to demonstrate that a given formulation has abuse-deterrent properties, how those studies will be evaluated, and what labeling claims may be approved based on the results of those studies. FDA will accept comments on the guidance received by March 11, 2013. See FDA'spress release.

The FDA hasproposed new rules on food safety, including regulations on good manufacturing practices standards for growing, handling and packaging produce. Specifically, to minimize the risk of serious adverse health consequences or death from consumption of contaminated produce, the FDA is proposing to establish science-based minimum standards for the safe growing, harvesting, packing and holding of produce, meaning fruits and vegetables grown for human consumption. FDA is proposing these standards as part of its implementation of the FDA Food Safety Modernization Act (FSMA). These standards would not apply to produce that is rarely consumed raw, produce for personal or on-farm consumption, or produce that is not a raw agricultural commodity. The proposed rule would also set forth procedures, processes and practices that minimize the risk of serious adverse health consequences or death, including those reasonably necessary to prevent the introduction of known or reasonably foreseeable biological hazards into or onto produce and to provide reasonable assurances that the produce is not adulterated on account of such hazards.

Another proposed rule would amend FDA's current regulation for Current Good Manufacturing Practice In Manufacturing, Packing, or Holding Human Food (CGMPs), which requires domestic and foreign facilities that are required to register under the Federal Food, Drug, and Cosmetic Act (FD&C Act) to establish and implement hazard analysis and risk-based preventive controls for human food. FDA also is proposing to revise certain definitions in FDA's current regulation for Registration of Food Facilities to clarify the scope of the exemption from registration requirements provided by the FD&C Act for "farms."

Despite cost control measures implemented within the Patient Protection and Affordable Care Act, a GAO study, entitledPatient Protection and Affordable Care Act: Effect on Long-Term Federal Budget Outlook Largely Depends on Whether Cost Containment Sustained, released Feb. 26, found that federal health care spending will continue to grow faster than the economy over the next 75 years. Looking specifically at long-term fiscal simulations from before and after the enactment of the law, the report found that despite new taxes within the statute to pay for health care expansion, the ACA is expected to increase the federal deficit by 0.7 percent of GDP or $6.2 trillion. GAO estimated that by 2050 spending on major health care programs would be 8 percent of GDP and gradually increase after that. Technological advances in new drugs, medical devices and procedures account for the largest portion of health care cost growth, about 50 percent; increases in income, health insurance expansion, health care cost inflation, administrative expenses and an aging population, respectively, will also account for the large rise in aggregate cost.

On Friday, GAO released a report, required as part of the Medicare Improvements for Patients and Providers Act (MIPPA) of 2008, evaluating the low-volume payment adjustment (LVPA), also created by MIPPA, which compensates dialysis facilities that provide a low volume of dialysis treatments for the higher costs they incurred. GAO found that the LVPA did not effectively target low-volume facilities that had high costs and appeared necessary for ensuring access to care. Nearly 30 percent of LVPA-eligible facilities were located within 1 mile of another facility in 2011, and about 54 percent were within 5 miles, indicating these facilities might not have been necessary for ensuring access to care. As a remedy, GAO recommends, "that the Administrator of CMS consider restricting payments to low-volume facilities that are isolated; consider changing the LVPA to a tiered adjustment; recoup 2011 LVPA payments that the Medicare contractors made in error; improve monitoring of those contractors; and improve the clarity and timeliness of guidance. The Department of Health and Human Services, which oversees CMS, agreed with GAO's recommendations."

According to arecent CBO score, implementing a "chained CPI" would result in a $28.5 billion reduction in government health spending over the next 10 years. The proposal evaluated by CBO would replace the consumer price index (CPI) with the chained CPI for all adjustments that are statutorily tied to CPI in mandatory programs and the tax code. The chained CPI is a measure of inflation calculated by the Bureau of Labor Statistics (BLS) that is designed to account fully for changes in spending patterns, such as responses to changes in the prices of different goods. Some policymakers have suggested that implementing such an index would effectively contribute to overall deficit reduction efforts.

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